Mexico’s Organic Simplification Constitutional Reform: Implications for the Digital Ecosystem

Background 

Former Mexican President Andrés Manuel López Obrador (AMLO) had bold ambitions to reshape the structure and influence of government agencies. In line with these goals, the 20 constitutional and legal reforms he proposed in February 2024 reflect his vision for transforming key areas, including justice, pensions, environmental responsibility, Indigenous culture, the electoral system, and the structure of federal public administration. 

Nevertheless, recently elected President Claudia Sheinbaum will be crucial to materializing AMLO’s ambitions. Sheinbaum not only achieved success in the polls based on AMLO’s social agenda, but she also inherited the support of most political stakeholders in Congress, which allowed her to keep momentum and continue with the reforms. 

Within this context, one of the most controversial components of the organic simplification reform is the elimination of crucial autonomous bodies for the digital ecosystem, such as the Federal Telecommunications Institute (IFT) and the Federal Economic Competition Commission (COFECE).  

The Reform 

The foundational idea for the constitutional amendment presented to Congress is to change control of general regulation so that the federal executive branch now leads it. As presented, the Ministry of Economy will address economic competition issues, with telecommunications issues addressed by the Agency of Digital Transformation and Telecommunications. The latter will have a ministerial level and replace the Ministry of Infrastructure, Communications, and Transportation (SICT). 

Similarly, the Agency will absorb the Mexican Space Agency (AEM), the Telecommunications Investment Promotion Agency (Promtel), the Mexican Postal Service, the National Commission for Regulatory Improvement, and the Center for Research and Innovation in ICT (Infotec). 

Nevertheless, the reform does not clarify how the transition will look in practice or what industry-specific measures will be considered so that previous processes (like disputes, budgets, plans, or programs) will be managed. The reform does state that Congress will have 90 days to modify the necessary laws to implement the reform.  

A positive message to the industry would involve a detailed transition plan describing each step, stakeholders, resources involved, key performance indicators, timeline, and expected outcomes. Ideally, it would be open to all agents involved, inclusive, and transparent. 

What it means 

Even if reducing the size of some public entities seems to have some potential benefits, the most glaring impact of suppressing autonomous bodies for economic competition and telecommunications is the centralization of functions(now part of the Executive branch) and their imminent loss of autonomy.  

Currently, Constitutional autonomy allows both IFT and Cofece to be independent from the central government, headed by the President. Providing administrative independence to regulatory authorities is a common practice in the region and globally. An independent authority can enforce competition without state intervention, prevent political disputes, and provide transparency to stakeholders.  

With the reform, the government's policy agenda will likely influence activities that require regulation, especially in areas where public companies compete in the market. 

Industries like telecommunications are well-known for being capital-intensive, and therefore, most of the investments in the market come from private companies competing in a liberalized market. Notwithstanding this, certainty over competition rules and, thus, investments are usually granted due to the independence and strength of the regulatory authorities. Such a situation is at risk in Mexico.   

Policy Outlook 

Considering this new scenario, it is essential for all stakeholders affected by the suppression of the authorities to have guarantees over competition rules and the level of intervention the government will partake in.  

In addition, more clarity is expected regarding the timeliness of the power transition, the accountability of functions, control mechanisms, transparency, and certainty over potential disputes. 

The changes pursued by the Mexican government could potentially dispute Mexico’s obligations under the United States-Mexico-Canada Agreement (USMCA) regarding the independence of regulatory bodies. Dismantling IFT and Cofece might undermine Mexico’s competitiveness, creating uncertainty over investment. 

Foreign companies operating or investing in Mexico should monitor policy developments during the transition period to obtain a strategic understanding of the new telecoms and competition landscape and react accordingly. However, even if some preliminary reports confirm a drop in Mexico's economic perspective, it is too soon to know how the economy will respond in the long run. 

Finally, a new institutional and legal framework is imminent, regardless of the controversy surrounding suppressing autonomous bodies. Therefore, all stakeholders should prepare to refrain from reacting but to operate and compete under new rules, a different structure of public power, and possibly under President Sheinbaum's known but challenging social agenda.